Convergence Analysis of Chinese Corporations’ Debt Leverage Utilizing the Nonlinear Time-varying Factor Model

ABSTRACT

This study adopts the nonlinear time-varying factor model and the Mann–Kendall non-parametric rank-sequence test to assess the convergence of non-financial listed companies’ debt leverage in China from 1998 to 2017. The results indicate that there is no overall convergence in the debt leverage of non-financial listed companies in China; however, most companies’ debt leverage converges by ratio within different clubs. In addition, the study reveals the heterogeneous characteristics, formation mechanism, and dynamic evolution of corporate leverage convergence, and provides new empirical evidence for “deleveraging” policies and new perspectives for corporate leverage research.

KEYWORDS:

• Nonlinear time-varying factor model
• corporate leverage
• convergence

Acknowledgments

We appreciate very much the financial supports from the General Project of Philosophy and Social Science Planning of Guangdong Province, China (Grant No. GD19CYJ16). We are also very grateful to the anonymous referees for their insightful comments and helpful suggestions to improve this paper.

Data availability statement

The data that support the findings of this study are openly available in Baidu Network Disk at https://pan.baidu.com/s/1c6pw24dIgGu25DUJQv4MaA, reference number hb31.

Author information

Hailian Xiao, South China Normal University, School of Economics and Management, Guangzhou, China, [email protected]

Chuanli Zhou, South China Normal University, School of Economics and Management, Guangzhou, China, [email protected]

Kaijie Zhuang, South China Normal University, School of Economics and Management, Guangzhou, China, [email protected]

Jin He, Guangdong University of Technology, School of Management, Guangzhou, China, [email protected]

Notes

1. The HAC method is one of the ways to reduce the autocorrelation of the model.

2. ST/ST* indicates specially treated stocks of listed companies in China. The reasons may be continuous losses or lower net assets per share than the par value per share.

Additional information

Funding

This work was supported by the General Project of Philosophy and Social Science Planning of Guangdong Province, China [GD19CYJ16].